Recycled Aluminum Demand Surged 800 bps Over 3 Fiscals

Time:2019-08-28 16:31 Author:Suny Group

Recycled aluminium has surged in aggregate consumption thanks to its pricing, said Crisil Research in its report. The usage of primary aluminium logged a compound annual growth rate of 3.5-4 percent in the last three years through fiscal 2019, while that of recycled aluminium zoomed at a robust 17 to 18 percent.

As a result, the share of recycled aluminium in aggregate aluminium market in India stood at 34 percent as of fiscal 2019, up 800 basis points (bps) from 26 percent three years ago. This is in line with the global trend, though the proportion is much lower compared with developed economies.

Fuelling this growth is the better cost economics recycled aluminium offers, said the report. For instance, the ADC-12 alloy manufactured using recycled aluminium is 15-20 percent cheaper than that made with primary aluminium.

Also, there is healthy demand for non-ferrous castings from the automotive sector, which consumes 65 percent of recycled aluminium in India. Demand from the building and construction sector, which consumes 10-15 percent of overall recycled aluminium, has also increased with rising penetration of recycled extrusions, especially in window frames.

“Demand for recycled aluminium has outpaced primary aluminium demand by 2.3 to 2.4 times over the last five years, led by better cost-economics, especially in the price-sensitive automotive castings space. This, in turn, has led to a surge in scrap imports, which soared to 1.35 million tonne in fiscal 2019, up from 0.7 million tonne in fiscal 2014, due to limited availability of optimum quality of scrap in domestic market,” said Prasad Koparkar, senior director at CRISIL Research.

Higher share of imported scrap at 85 to 90 percent (as compared to domestic scrap) is largely on account of lack of efficient ecosystem in India for scrap collection, segregation, and processing facilities (such as scrap yards). India primarily imports domestic aluminum scrap requirement from Europe and West Asia.

As for domestic primary aluminium producers, these have been able to operate at healthy capacity utilisation levels despite the competition posed by aluminium scrap imports, as the surplus production has been exported, informed the report.